Stirring a muddy pond with a stick

There appears to be incredibly little clarity when it comes to Irish Economic statistics. Today over on irisheconomy.ie Aedin Doris asks “Where are the wage cuts?”. I might scream and shout – “here!” Having taken a 10% pay cut last year (partially re-instated for next year, 3% so far), but my industry isn’t even included in the figures she’s analysing. In fact the CSO figures she based her post on cover less than 1/6 of the workforce (according to Ronan Lyon’s in the comment section).

At Notes on The Front, Michael Taft responded to Constantin Gurdgiev who earlier claimed that Irish social welfare rates were the second highest in the EU. In the comments section Constantin rejects Michael’s earlier assertion that they are among the lowest, which in turn was an attack on Sarah Carey who claimed they were the most generous payments in Europe having misquoted a Department of Finance report that actually said they were among the highest, not actually the highest. At progressive-economy Sli Eile interpreted the same report (as Constanin Gurdgiev) as showing Irish social welfare rates weren’t high. In a further post Constantin claims the figures show that show that pretty much anyone working in lower grades of all sectors in Irish economy would be better off on social welfare.

So who is right? The brutal truth is, it’s impossible for me to tell. Michael correctly warns that Constantin and the OECD report are using synthetic measures (rather than analysing the benefits paid out themselves), but misrepresents Sarah Carey as having publicly retracted her initial claim (she clarified it in reality). Constantin warns that Michael in his initial analyses focused only on one benefit payment and excluded all the others recieved. Michael in deconstructing Constantin’s analysis excludes housing benefit data, data from Greece and Italy and also obfuscates matters by dealing with the recently unemployed first, which Constantin had conveniently excluded from his analysis. Joy.

I do suspect that from their own perspectives there is a large dollop of truth in what they are saying, but that it’s entirely subjective with little concerted attempt to be objective.

A basic knowledge of maths will tell you that what numbers are included or excluded from a dataset critically affects average produced for the dataset. If members of a set of numbers are each multiplied by a different number the relationship between the each number in the set will change (e.g. adjusting for locally different affects such as the local average wage or the purchasing power of a euro locally will enable you to expand or contract the difference between average values produced across different countries).
Ultimately, what this means is that if you want to ‘prove’ a particular point with a particular dataset, that freedom for the investigator enables them to pollute the result. If you are free to exclude data points you don’t like (e.g. exclude lower-paid private sector workers from a comparison of public and private sector pay), and free to apply whatever calibrations to the data you like (e.g. adjust for PPP) then you can choose to apply only those that bring the data closer to your pre-held belief. While these actions may be based on the analyses of facts, and may be mathematically sophisticated they don’t actually help us accurately discern the truth about what is really going on in the economy. A solution may well be, for a set of expert economists from across the political spectrum to agree what we should be measuring in the first place, so that in the analyses we can be sure that domain experts aren’t subconciously or otherwise tailoring their interpretations of results to favour their own viewpoints.

From public and private sector pay, to social welfare rates, the statistical analyses produced by the experts aren’t providing a clear view, they’re just stirring an already muddy pond with a bloody big stick.

  • Mick Fealty

    I think you’ve hit upon the greatest discouragement in giving serious consideration to real public policy: the general public’s fear (nay loathing) of mathematics. Yet, without it, it’s often hard to see which way is up.

    That and getting economists to agree on anything.

  • J

    Mack – Aedin is a woman’s name. He is a she i am afraid 🙂

    good post. economics really delved into mathematics over the last few decades. One of the great by products has been the rise in online economics forums most of which are very accessible.

  • Mack

    Lol, J – pronounced A-deen I presume? I thought it was a different spelling of Aodhon.

    Apoligies Aedin!